MERS

Dec 8, 2010

dictionary-150[Note: updated on 2.16.2011]

What is MERS?

Mortgage Electronic Registration Systems (MERS) is a privately owned registry that tracks servicing rights and the ownership of mortgage loans in the United States. Fannie Mae, Freddie Mac and several large banks set it up in 1997. It enables lenders to package and sell mortgages without recording each transaction with county property offices, thus avoiding associated fees. It has registered 60% of all mortgages, or 66 million total.

What's the significance?

MERS' actions are coming under heavy criticism. It used to be that a mortgage was recorded and a fee was paid when it was issued and each time it was resold in order to ensure clear claims to the property. MERS circumvented those fees and tracked the transfers of ownership on the mortgages electronically, which is now leading to data entry errors, system crashes, and other problems. It is also foreclosing on properties, claiming it is the mortgagee of record, but it doesn't actually have any of the notes since the process was paperless and has no financial interest in the mortgages. This allows foreclosures to proceed without producing the actual mortgage note. MERS also often ends up as an obstacle for a consumer seeking information on a loan and protects lenders from legal action. On top of it all, rather than employing people, it relies on "certifying officers", who are usually mortgage servicers and foreclosure mills.

Who's talking about it?

Edward Harrison warned of the danger of MERS in the foreclosure process back in 2009...Randall Wray calls for shutting MERS down due to its role in the foreclosure fraud mess...Yves Smith details all of its operational failings...Bank regulators have launched an investigation into its practices...Marcy Kaptur has proposed legislation that would bar Fannie and Freddie from buying mortgages registered in MERS...US Bankruptcy Judge Robert E. Grossman found that MERS has no legal right to transfer mortgages, dealing a severe blow to the company.

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